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Intel announces $1 billion expansion in New Mexico

ALBUQUERQUE, N.M. -- Computer-chip giant Intel Corp. said Thursday it will spend $1 billion to enlarge its New Mexico microchip factory -- the largest plant expansion in the semiconductor industry's history.

'This is our first billion-dollar factory, but it won't be our last, ' Intel Chairman Gordon Moore said. 'Chip factories are getting bigger and more expensive as our manufacturing technologies continue to become more complex.'

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The selection of Intel's Rio Rancho, N.M., plant for the capacity expansion ends a bidding war among half a dozen states for the new facility.

New Mexico, Arizona, California, Oregon, Texas and Utah had all sought the project, which will create up to 1,000 jobs and add more than 1.3 million square feet of new space.

Construction will start immediately, with new production scheduled to begin in 1995.

Thursday's announcement comes at a time when Intel is hungry for production capacity. It passed Japanese rivals last year to become the world's largest semiconductor producer and is the sole supplier for the 486 chip that has beocme the standard 'brain' for personal computers.

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Intel is also ramping up production of its powerful fifth-generation microprocessor, the Pentium, which began shipping last month after delays due in part to trying to meet strong customer demand.

On Thursday, Moore hinted many mammoth capacity expansions will be forthcoming from Intel competitors as well.

'The entry fee to be a major player in the global semiconductor market of the 90s is $1 billion -- payable in advance,' he said.

Intel rivals Advanced Micro Devices Inc. and Motorola Inc. have also been adding capacity. Industry tracker Dataquest has estimated that North American spending for semiconductor plant expansion will top $4 billion this year, compared with $3.5 billion in Japan -- the first time since 1987 that U.S. spending would top Japanese investment.

Intel said it will spend $1.6 billion this year on expansion. It said its U.S.-based manufacturing work force will expand 18 percent this year.

The Rio Rancho expansion calls for completion of 180,000-square-feet of an existing building and a 1.3 million-square-foot addition, including 140,000 square-feet of clean-room space, where computer chips are actually made. Chips will be made on 8-inch diameter wafers with circuit lines that are 0.40 microns in width.

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The decision is a particular blow to California officials, who had hoped that the company would decide to expand at a site near an existing Intel plant in Folsom, Calif.

The state has lost more than 800,000 jobs since mid-1990, but it had been able to attract Intel's last major expansion. Intel announced last October it would spend $400 million for plant expansion at its headquarters in Santa Clara, Calif. in the first major increase to Silicon Valley's semiconductor production in close to a decade.

The Rio Rancho factory, located in suburban Albuquerque, was already Intel's largest manufacturing site -- with 2,400 Intel employees and several hundred additional support people working for Intel suppliers.

In the past three years, Rio Rancho economic-development officials have lured seven other California-based firms -- Olympus Corp., U.S. Cotton, California Aerodynamics, Topform Data, Great American Stock, Bergen Brunswig and Applied Materials -- to the city.

Officials said that over the last six years, Rio Rancho has been able to attract 20 out-of-state companies, creating more than 5,000 new jobs.

New Mexico Gov. Bruce King said the announcement was the culmination of more than 10 months of work by state and local officials and private businesses.

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'The Intel expansion demonstrates that New Mexico is serious about attracting and keeping major industries,' King said.

King said the state developed a package of incentives, including in- plant training funds, investment credits, and tax advantages. The state recently approved a $1 billion industrial revenue bond issue to provide low-interest financing.

Sandoval County, where Rio Rancho is located, also authorized industrial revenue bonds for the project.

The wooing of Intel is not a suprise. As the influence of International Business Machines Corp. has declined, Intel has become the pacesetter in computer hardware design.

It announced in December it would post a major increase in fourth- quarter profits and predicted its 1993 revenues would be up 25 percent to $7 billion, leading analysts to revise their earnings projections.

But Intel's actual fourth-quarter profits were far above the revised expectations. Its fourth-quarter earnings more than doubled to $428.6 million, or $1.97 a share, compared to the year-ago quarter, on a 54 percent increase in revenues to $1.86billion.

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